Share this

A lobbying battle is shaping up in Washington over the first major provision of the Obama health plan. The stance that the administration is taking on the fight could undermine its efforts to implement every other element of its legislation.

At issue is are floors that the new law places on a health plan’s medical-loss ratio, which is the amount of revenue a plan spends on medical claims. Under provisions included in health reform, insurers can only spend 20% of their premiums on running a health plan if they offer policies directly to consumers or to small employers. The spending cap is 15% for policies sold to large employers.

The Obama team included these measures as a way to control industry profits and make sure that the bulk of premium revenue was funneled back to patients in the form of medical care. But the provision is likely to backfire; by constraining the ability of health plans to invest in new products and to offer coverage inside the new state-based insurance exchanges that Mr. Obama wants to create in 2014.

As a result, which expenses that are allocated as administrative costs is becoming a critical. Insurers are battling to broaden what can be counted as a medical expense.

Political appointees inside the Department of Health and Human Services (HHS) are said to seek to a very narrow definition of what can be included in a plan’s medical expenses. For example, nurse call centers for beneficiaries are said to be on the proposed list of administrative costs. So are disease management programs, as well as efforts to route out wasteful or fraudulent sending. The more things a plan must count as part of the 20% it can spend on administrative cost, the lower its profits.

The problem is that the Obama health plan is dependent on insurers investing in new products. They will need to use their profits to pay for the legislation’s start up costs.

Designing, marketing, and implementing health plans inside the new state-based insurance exchanges is essentially a new business model for many health plans. Some of the largest insurers have focused their infrastructures mostly around selling health plans to employers, not individual consumers. They will need to develop new tools to enable more direct interface with individual beneficiaries.

Capping how much money can be spent on administrative costs will make if harder for plans to make these necessary investments.

Moreover, health plans often lose more money when they are first launched, in part as a result of high start-up costs. For these reasons, the medical loss ratios are typically low on new plans, and then erode over time as more of the premium revenue is consumed by medical costs and less is spent on overhead.

Caps on profit margins will make it harder for insurers –especially smaller, more regionally focused health plans – to launch a new product inside the state-based insurance exchanges. The rules on capping medical loss rations have the effect of favoring older products, larger insurers, and national over regional or state-based health plans. If the administration takes a heavy hand on this first major provision, it may find itself with fewer partners for implementing every other piece of its reform.

If confirmed by the U.S. Senate, Elena Kagan may sit for decades on the nation’s highest court. Many Americans worry over the prospect of a political activist, driven by ideology, ensconced in that position. It is, after all, a court that has far too often demonstrated a proclivity to overstep its bounds and intrude into the ordinary lives of American citizens.

Thus we see the likes of Sen. Ben Nelson (D-Neb.) announce he will vote against Kagan. Her lack of a judicial record, he said, “makes it difficult for me to discount the concerns raised by Nebraskans.”

Those concerns are well placed: Kagan is a political lawyer, not a legal scholar. She has the least amount of relevant legal experience of any Supreme Court nominee in at least half a century. Her record, particularly as a counsel in the Clinton White House, shows a contemptuous attitude toward provisions of the Constitution she dislikes, such as the Second Amendment. She appears to have no problem disregarding the law to achieve the public policy ends she wants. At her Senate hearing, her answers —and the lack thereof — indicated that she sees no limits on the power of Congress. She appears to believe that the federal government can do anything it wants.

Indeed, Kagan’s expansive view of federal authority may be precisely why President Obama picked her. The president has relentlessly pursued an agenda that enormously expands the federal government and its control over our lives and our economy. Obamacare, with its unconstitutional mandates on individual Americans and its takeover of a sector representing one-sixth of our economy is but one item on this agenda. Certainly the president seeks a vote on the court to rubber stamp these and other Big Government initiatives when they are challenged at the bar.

It is disturbing that so many senators seem willing to approve a nominee who, even during a time of war, showed such hostility to the men and women of our armed forces. Her ban on military recruiters at Harvard demonstrated not just animosity toward the military, but her hypocrisy born of politics and careerism.

Kagan has tried to excuse what she did by claiming she disagreed with the military policy on homosexuals. But that policy was implemented by Congress, not the military, and it was signed into law by President Clinton. Yet Kagan did not bar any of the senators or congressmen who voted for that policy from the Harvard Law School campus. Nor did she have any problems accepting money from Saudi Arabia for a center on campus to promote Sharia law — law that treats homosexuals far more harshly than “don’t ask, don’t tell.” Nor did she hesitate to take a job working for the same president who came up with this allegedly offensive policy. Clearly, Kagan’s “principled” stand had its limits; it was promptly abandoned when it conflicted with her personal political ambitions.

Yet a few years later, her unprincipled and hypocritical behavior seems to be working. It has brought her to the point where she may soon attain the highest achievement in her chosen profession: a lifetime sinecure on the U.S. Supreme Court. From that post, she can wreak tremendous damage on American liberty for decades to come.

The U.S. economy is slowing up again and suddenly the likelihood of another downturn and of a double dip recession has become very real, sparking a great debate in Washington between those calling for more stimulus and those calling for fiscal responsibility as a way to create confidence among investors.

Here in Singapore from where I am writing this sounds like a surreal debate. With a current GDP growth rate of 19 percent (no, that’s not a misprint), Singapore is neither stimulating nor cutting government expenditures. What it is doing is exporting and attracting foreign investment to further strengthen the export machine that has driven unemployment to under 2 percent. Contrast that with the United States where the $400 billion trade deficit is again on the rise as official unemployment again tops 10 percent and real unemployment heads for 18 percent.

The discussion in the United States ought to be how we can imitate Singapore. President Obama made a half hearted step in that direction when he announced the goal of doubling U.S. exports. While that was a good first step, it totally ignored the other steps necessary to realization of the goal. In the first place, rising exports only help economic growth if they are accompanied by relatively declining imports. Obviously, if imports triple while exports are doubling, not much has been accomplished in terms of reducing unemployment. One important way other countries like Singapore keep exports rising more than imports is by managing exchange rates to ensure that their currencies are not over-valued. With the dollar now generally considered to be anywhere from 15 to 50 percent over-valued versus the Chinese yuan and other Asian and European currencies, this is a policy the Obama administration might well consider imitating.

Singapore officials also work hard at persuading global companies to off-shore their production to Singapore. To do this they use special tax abatements, low corporate taxes, offers of free infra-structure, free land, and free worker training, and world class infra-structure to help reduce production costs. In lieu of matching U.S. programs, virtually the whole of Silicon Valley has moved at least some production and even R&D to Singapore, thereby creating Singapore jobs while reducing U.S. jobs.

This is not rocket science. Americans could do it too, but not until they start having a real world discussion.

Floridian Pastor Wants to Stage International Burn a Quran Day an Affront to Religious Freedom

So a church in Florida wants to stage a book-burning party of the Quran. Big deal, right? After all, anti-American zealots in foreign countries are always staging flag burnings and toasting various effigies of our presidents, so whats wrong with a little tit-for-tat?

Everything.

The First Amendment is a wonderful thing. It allows us to express our opinions without fear of government reprisal. The press can publish absent Big Brother on the editorial page. We march on Washington, worship where and what we like, and petition our government for change. We can even burn the American flag, as odious as that is. So a church barbecue featuring the Quran as main course is protected speech. But, like the KKK marching in Skokie, just because we can doesn't mean we should. Nor should we sit silently by as it happens.

Allegedly, the motivation for the ill-named International Burn a Quran Day by the oxymoronically-titled Dove World Outreach Center is to remember the victims of 9/11 and protest Islam as a religion of the devil. Its founder, Terry Jones, also targets gays and lesbians as godless, but his special brand of venom is reserved for Islam. Hes written a book, goes on YouTube, and is undoubtedly reveling in all the attention he is receiving for his event. And all the protests, the resolutions of condemnation from national church groups, even anti-Quran burning pages on Facebook will do little to deter the ravings of a bigoted gloryseeker.

The fact is, we know that the suicidal brainwashing of terrorists by Al Qaeda is a far cry from the true nature of Islam. Members of the Islamic community lived in the United States well before 9/11 and continue to do so today. To tar all Americans of the Islamic faith with the terrorists of 9/11 is as ridiculous as saying that Pastor Terry Jones is representative of all Christians in the United States.

So the best thing we can do is ignore him. Isolate him. We will have to explain to the international media that Jones is a nut, a one-off, and we will have to explain how our Constitution defends his right to be an obnoxious idiot who may be endangering American lives overseas. We can tell the media to cover something else of equal or more import, like a library opening or a new birth at the zoo. Or perhaps people of good will can gather outside his so-called church and stage readings of William Bradfords Of Plymouth Plantation, which described how a band of people nearly four centuries ago, whose idea of God did not fit into the established Church of England theocracy, fled searching for a place where they could worship God as they saw fit, and settled on the craggy shores of a country that became the United States, and how un-American, how unpatriotic it is to demonize the religious beliefs of others on this, our hallowed ground of religious freedom, our America.

The second quarter GDP numbers should be a wake-up call to Congress and the White House. The recovery is weak and likely to get weaker.

The headline growth number of 2.4 percent is already pathetic. Given the severity of the downturn, we should be seeing growth numbers in the range of 5 to 8 percent. That was the case following the steep recessions in 1974-75 and 1981-82. A 2.4 percent rate is barely fast enough to generate positive job growth, much less job growth fast enough to create a dent in a 9.5 percent unemployment rate.

However, focusing on the 2.4 percent growth number paints an overly optimistic picture. Much of this increase was due to inventory accumulation. The economy has just been through a classic inventory cycle in which inventory rundowns were a big drag on growth at the end of 2008 and the first quarter of 2009. Beginning in the second quarter of 2009, inventories were making a positive contribution to growth.

The economy is now accumulating inventories at a very rapid pace. The rate of inventory accumulation from this point forward is more likely to slow than increase. This means that inventories will be neutral or even a drag on growth through the next few quarters. The GDP growth rate will be equal to, or possibly lower than, the rate of final demand growth.

If we look at final demand growth it has been slow and steady through the last four quarters, averaging just 1.2 percent. It was 1.3 percent in the most recent quarter.

There is no reason to expect that final demand growth will accelerate in the next few quarters. State and local cutbacks will be a drag on growth, as well be the housing market, following the end of the first-time homebuyer's tax credit. Even the federal government is likely to be somewhat of a drag with the end of the Census and the winding down of the stimulus package.

In short, people should be very, very concerned about the weak 2nd quarter GDP growth numbers. The economy looked pretty bad before we got these data. Now it looks even worse.

Those Americans now within binocular range of their first Social Security check ought to be familiar with the famous Three Great Lies of their generation: "I'll respect you in the morning;" "The check is in the mail;" and, my favorite, "I'm from the government, and I'm here to help you."

Unfortunately, baby boomers are now being bombarded with three more whoppers via radio and newsprint, all in anticipation of President Obama's National Commission on Fiscal Responsibility and Reform; a.k.a., The Deficit Commission:

- "Social Security isn't the cause of the deficit, and so it should be left alone;" and

- "Social Security is only in trouble because of Wall Street and the Bush tax cuts."

To which the data from the Congressional Budget Office, the Federal Reserve, the Government Accountability Office and the Social Security and Medicare Boards of Trustees reply, "balderdash."

Mythbusters in Green Eyeshades

You don't need a green eyeshade or even a calculator to understand the problem. The number of Social Security and Medicare recipients will nearly double between now and 2030 while the number of employed workers paying for their benefits will barely budge. Current beneficiaries of Social Security, Medicare and Medicaid already get 40 percent of total federal spending, and are likely to be taking 70 percent of it within 20 years. Paying for that and all other federal spending will require more than a 40 percent aggregate tax increase, thereby expanding the government's share of the economy from the current 23 percent to well over 30 percent. In fact, even a 100 percent tax on the earned income of the wealthy is not nearly enough to cover the gap.

And note that none of these gargantuan numbers include the cost of covering the unfunded pension and health care liabilities for current and future state and local government retirees, which themselves total into the trillions of dollars. Even the liberal gadfly and current California gubernatorial candidate Jerry Brown acknowledges that those benefit formulas will have to be cut. Perhaps Brown should be appointed to the deficit commission.

Now let's look at those Bush tax cuts for the "wealthy" (i.e., anyone earning more than a member of Congress). Even under static calculations of the type used by the CBO, the tax cuts for high earners contributed no more than 4 percent of the swing in between the federal budget surplus of 2000 and the deficit projected for 2011. Moreover, even Democratic economists acknowledge that those cuts helped pull the country out of the 2001-02 recession), substantially boosting Social Security and Medicare contributions beyond what would have occurred without them. Bottom line: the Bush tax cuts helped Social Security finances and, at worst, added almost nothing to the aggregate fiscal crisis.

Why Greed Is Good, Especially in Canada

Last but not least on our list of supposed Social Security villains is Wall Street. Liberal economist and The American Prospect co-founder Robert Kuttner declares that our deficits are due merely to "wild speculation on Wall Street," ignoring the fact that Fannie Mae, Freddie Mac and the Federal Reserve are not Wall Street firms, and then asks "why perversely cut these [entitlement] programs to pay for the sins of Wall Street?"

Well, even if one thinks Wall Street is the reason for the deficits (wait, wasn't it the Bush tax cuts?), we aren't going to solve this scale of a problem by trying to make them pay for it. Even the highest taxes proposed during the recent bout of banker-bashing would cover less than 1 percent of 2040's deficit in the entitlement programs. (Note that in previous posts I have supported new taxes on Wall Street, but for different reasons.)

Meanwhile, Canadians have their own informative take on stock markets and social security. In addition to the minimal Old Age Security payment (about $500 a month), the Canadian equivalent of U.S. Social Security is the Canada Pension Plan. Unlike U.S. Social Security funds, which "invest" only in federal Treasuries, CPP's funds are invested heavily in corporate stocks and bonds by a crown corporation independent of the government; that is, the Canadian social security system is far more "privatized" than anything that President Bush ever proposed. More than half of the investments run through Wall Street.

This investment in equities and the quasi-privatization of its management is one of the main reasons (though not the only one) that the CPP is in vastly better financial condition than Social Security; that is, its average annual return on its funds more than doubled the return on Treasuries even after the 2009 market crash. By investing in equities and various other financial instruments (and doing so in an intelligent and prudent fashion), Canadian retirees will continue to receive significantly higher benefits per dollar contributed compared to what we've gotten for our Social Security taxes.

Be Careful What You Wish For

Many of the deficit commission attack ads running on local and national radio demand that retirees get the full fruits of their lifetime investment in Social Security and Medicare. Okay, let's assume, in true lockbox fashion, that all of the Social Security and Medicare taxes paid in by the baby boomers during their working years had been placed in a bank account earning a rate equal to the cost of federal borrowing. A few simple calculations reveal that about the only people who would actually have paid in enough over their working lives to earn the Social Security and Medicare benefits to which they are entitled under the current formulas are the upper middle class and wealthy, the very people who Obama is targeting to cover all of his other spending and an additional double-tap of benefit cuts and uncapped Social Security tax liability.

In other words, most current and future Social Security and Medicare recipients will be, effectively, on welfare, having paid in nothing like the dollars they will be taking out in benefits. Instead, their unearned cushion will be paid by their children and the upper middle class. Is that fair? It is for the poorest Americans, to whom the nation has made at least a moral commitment to keep them out of abject poverty in old age, but for most of the rest of the country there is no similar case for such transfers in a system that was supposed to be a self-funding insurance system, not an intergenerational transfer of wealth.

National Committee to Preserve Fiscal Suicide

With unending trillion-dollar budget deficits and unsustainable entitlements steadily pushing America into a Greece-style debt and pension tar pit, there is no hiding the box we're in through trust fund and budget projection sleight of hand. The only tools left for our salvation are political courage and a spreadsheet. Obama's deficit commission will be doing God's work. That's why a better name for it might have been "The National Committee to Preserve Social Security and Medicare," but apparently that's already taken by one of the radio charlatans, which is something like BP holding the copyright to "The National Committee to Preserve the Gulf of Mexico."

Steve, these two graphs from the Center for Budget and Policy Priorities very well illustrate the issues. The first one shows that the real budget crisis is in Medicare and Medicaid, and debt interest, and not Social Security. The second one shows the impact of the Bush tax cuts and the economic downturn in running up the deficit. Together, they suggest a better proposal is eliminating the Bush cuts on the wealthy and tackling health reform with Medicare/Medicaid in mind (that’s why single payer, which saves billions of dollars was on the table.)

There are thousands of patients who suffer severe spinal cord injuries every year. Federal regulators will permit a much anticipated study looking at whether embryonic stem cells will aid spinal cord injury victims. We can’t assume it will work or that there are no safety issues (that’s why there is informed consent), but gathering this kind of factual data to answer such questions is exactly what scientists and doctors need to do. If it can be done with adult stem cells or some other method down the line, terrific. But the basic science needs to be done so that all the options can be considered for safety and efficacy. Support for stem cell research has been constant over the last decade with consistent majorities supporting research (the last polling I am aware of is Gallup in 2010, where stem cell research was viewed as morally acceptable by 59-32.) Morality is not determined by polling, but public opinion has been and remains strongly supportive.

Jim Wojtasiewicz (guest)
VA:

Three fallacies in Mr. Steckler's piece today about Social Security. One, this is not the same as a private pension fund where each contributor gets back all they paid in, with interest. It is a social insurance fund where the relatively more affluent get back less than they paid in, while the relatively less affluent get back more.

Call it socialism, but that's how it is meant to work. To apply a standard that it has to pay out in full even to the most affluent contributors isn't just ridiculous, it is obscene. Second, repeating over and over that tax cuts for the wealthy bring in more revenue than they cost does not make it true. It isn't. You don't need a green eyeshade or a calculator to see that trickle down economics only produces, to put it politely, trickle. Finally, posing a stark choice either to cut Social security benefits or invest the funds in the stock market is a fool's dilemma. In the new financial reform bill, banks and the Republicans who do their bidding proved themselves untrustworthy by refusing to keep a firewall between public funds and the bonus babies cooking up ever more risky and exotic ways to pocket profits from them. We can't trust any of these people to touch our Social Security.

Mike Gorman (guest)
OH:

Tax cuts do not cause deficits, spending more money than you have does. Anyone managing a household budget knows this. If tax cuts are the problem why did Obama offer tax incentives for buying a new home or for new hires or for the new GM car?

Obama and his fellow Democrats have turned this economic downturn into a major recession. Now the question is will Obama let the Bush tax cuts expire? I hope not but he will probably find a way to nail the rich yet again and still continue to blame Bush.

Tamsen Danby (guest)
MI:

It is no surprise that the recovery is progressing albeit at a snail's pace. We cannot continue to be the policeman of the world. We cannot continue to pour billions into other countries, We cannot support a military industrial complex.many times the size of all other nations combined. We are exhausted. We will end like the Romans.

Tom Genin (guest)
CT:

The fact that GDP numbers go up a little after a freefall should not have encouraged anyone to begin with. The only number that matters is jobs. Standard of living is achieved not only through being employed, or even rising GDP numbers, but by being employed with a good paying job.

And employers pay more for employees when they need to attract employees. So when unemployment goes up, overall pay goes down. Why pay somebody more when there are 20 equally qualified people dying to do the job for less? Small business employers typically have more loyalty to employees than their bigger counterparts, but love of employee ends when words like "personal bankruptcy" or "foreclosure' enter the dialogue. Factor the coming layoff of Census workers, a flat holiday season, the fact that many companies artificially took profits in this year to avoid crushing taxes next year, and an ever increasing crushing debt payment, and you get January 2011 looking like the Mayans were a year off.

Alex Van Dyke (guest)
MN:

The recovery has been so slow because the Obama administration and his Democratic colleagues have fallen in love with the idea that if the federal government just injects enough taxpayer dollars into the economy that there will be a big economic recovery.

It should be evident to everyone that it hasn't worked. Unemployment benefits have been extended eight times since 2009 and the unemployment rate is still nearly 10 percent and the stimulus package hasn't caused businesses to create a substantive number of jobs and all that the auto bailout has done is to keep the auto companies afloat but it hasn't created many jobs. Small businesses need tax cuts and loans in order to get more capital which will allow them to create more jobs but that isn't happening and the economy isn't growing enough to actually create jobs.

Fred Croft (guest)
CA:

The second quarter GDP slowdown shows how little effect traditional "prime the pump" economic tools really have. Keynes noted that a core element of economic management was the nourishment of "animal spirits": the economic optimism that drives entrepreneurs to build businesses, create jobs, and expand the economy.

An administration that spends its time talking about "kicking ass", "corporate fat cats" and all the rest of it are stomping over Keynes' "animal spirits" with hobnailed boots. W'e re not going to turn this around and build jobs in this country until the folks in the White House demonstrate a big shift in their business outlook.

Ray Bellamy, MD (guest)
FL:

Greg Dworkin is correct: the problem is in Medicare and Medicaid, not so much in Social Security. And the health reform just passed will not help in either area. In fact, both programs are headed for more trouble in the near future.

Medicaid physician reimbursement rates are to go up to Medicare rates but that is not really sufficient to get most physicians on board as providers. Primary care MDs in my community tell me they lose money on every patient with Medicare they treat, even with supplemental coverage. And the increase to Medicare rates for Medicaid patients will only be for 2 years, then there will be disruptions and confusion as providers who became Medicaid physicians drop out of the program and those patients in Medicaid, a much larger number thanks to the expansion under reform, will be cast adrift. Dworkin mentions single payer, which was never allowed a fair hearing or seat at the table, but was totally excluded as an option, even though any sober analysis of the dollars and cents would show it is the only true reform we can afford, and it would be far superior to any other approach. It would truly fix both Medicare and Medicaid, and make them comprehensive and sustainable, with superior data on what works.

Lorenzo Davenport (guest)
GA:

President Obama has told Americans about a new America, where the consumerism of the past will be replaced by a more "collectivist" mentality, a time where we will be enjoying each other instead of "things," a time where the haves will be forced to share more with the have nots with the government determining how the slices are cut.

That time is coming to fruition, and the results will be seen soon. The people are responding accordingly by voting with their pocketbooks. The businesses are showing no confidence by not hiring, and the country as a whole will continue its malaise into an uncertain future, fearing over their own lives as well as their children's. This is the new order that Obama has brought, even though this may not be the "hope and change" that those who voted for him expected. Be careful of what you wish for. Be careful of what you vote for.

Patrick Northway (guest)
IN:

Sorry, dude, your wake call came 30 years ago and you got up on the wrong side of America. The policies of the past 30 have produced a perfect storm in this country.

You have 30 years of real world declines in income for all but the richest 10 percent; credit is no longer even accessible for many, many Americans; you have $11 trillion in wealth that has been wiped out due to AIG, Goldman Sachs, Chase, BOA, and friends; and you have business management in all sectors who, as long as they cut jobs and costs (and thereby cut more spendable income!), get enormous bonuses. Businesses are not investing in any capital, human or otherwise, and sitting on cash reserves. Forget "may"- you will have a decades long depression and the primary reason is the insane fiscal policies of the GOP and the chamber of con artists. Tax policy, regulation, incentives and legislation all favor big business and the super rich to the widespread detriment of the country. You will not have a recovery because the American consumer no longer has the means to support an economy of scale for 300 million-plus people. No exaggeration, if you support and vote for the GOP in 2010 you will doom this country. With Obama, we might have a sliver of a chance.

Richard Ondo (guest)
OH:

The room is crowded with do-nothing politicians. President Bush wanted social Security payments to be invested in free market enterprises. It's still a good option. Of course, if the Bush tax cuts are allowed to dissolve, we are headed into a second downturn and that wouldn't be the time to invest. Timing is on our side. Most economists can see the next shoe. Will it drop?

Lee (MMBJaxk) McCarty (guest)
NV:

The legal mouthpiece for the ultra-conservative Heritage Foundation, Mr. Hans A. Von Spakovsky has reached for the gutter end of politics today and had a great swim in the current of defamatory politics that marks this election season from their end of the political spectrum. His long diatribe about Kagan ends with these gems of wisdom(?): "A lifetime sinecure on the U.S. Supreme Court". "From that post, she can wreak tremendous damage on American liberty for decades to come". And what is a "sinecure"? "A sinecure means an office which requires or involves little or no responsibility, labor, or active service". "It is a paid job requiring little work". And this gentleman has the audacity to speak of "no respect for the second amendment". What he clearly lacks is perspective on our founders intentions of naming SCOTUS justices for life as their prime example of just how important each person who serves is to our tradition laid down in the Constitution that guarantees "life, liberty, and the pursuit of happiness". This commentary too easily passed over the recent right wing justices passage of unlimited corporate money flowing to the single cause of business first, last, and forever as "people".

Don Grimes (guest)
MI:

Don't be too concerned about the second quarter GDP numbers, they were distorted by the way foreign trade data are effected by fluctuations in the dollar. Specifically, the second quarter GDP numbers report that real net exports deteriorated by $87.5 billion as "real" imports surged by 28.8 percent at an annual rate. Does anyone really think that real imports jumped by this amount last quarter, and remember that changes in the "price" of the products, like oil, are supposed to be discounted. If the deterioration in net exports had been ignored real GDP would have grown at 5.0 percent instead of the 2.4 percent reported, boosted by an unsustainable growth in inventories. Changes in net exports can also boast reported GDP growth, like it did in the fourth quarter of last year, when GDP was reported as growing at 5.0 percent, but without the contribution of net exports it was only 3.0 percent. Was the U.S. economy booming at the end of last year?
The NIPA accounts recording of net exports have lately been bouncing around like a yo-yo from quarter to quarter, probably because of changes in the value of the dollar. Unfortunately the headline GDP growth rates can be "temporarily" distorted by these swings.

More POLITICO Arena

About the Arena

The Arena is a cross-party, cross-discipline forum for intelligent and lively conversation about political and policy issues. Contributors have been selected by POLITICO staff and editors. David Mark, Arena's moderator, is a Senior Editor at POLITICO. Each morning, POLITICO sends a question based on that day's news to all contributors.